The liquidity of options is an important consideration when picking a strategy. Any broker you work with has to pass your order to the broader market, so you should always see your better bid or better ask posted to one of the the exchanges and it should show up within about 30 seconds of you placing an order. Some brokers allow you to choose which exchange you want to handle your order, some do not.
QQQ options are about the most liquid option market there is. The QQQs trade on all the options exchanges, and the daily volume is high. If the bid ask spread is 10 cents, you can often get filled in the middle because there is so much activity. On other options, such as the index options that are only traded by CBOE, you will find wider spreads and rarely get filled at prices between the MMs bid and ask. You can post your orders there, but you will not often get filled until the market moves to your price. Stock options vary a lot. The more liquid stocks have more options activity and generally smaller bid ask spreads than stocks that trade smaller volume.
Futures are similar to options in terms of leverage, but they have little time premium and offer none of the protection you get with options. If you buy a QQQ call and QQQ takes a dive, you cannot lose more than you paid for the call. If you buy nasdaq futures, you obligate an amount of cash called a "performance bond", but if QQQ takes a dive you can lose a lot more than that.
A mini futures contract on the nasdaq is worth $20 per NDX point, and there are 40 NDX points per QQQ point. So a one point move on the QQQ translates to about $800 of gain or loss on one futures contract. This is comparable to the gain or loss on 8 in the money QQQ call contracts. There is no change in the rate of gain or loss as the price of the underlying changes as there is with options. At todays prices, one nasdaq futures contract is worth $20*1450 = $29,000, and in theory you could lose all of that if you buy one contract. The good news is there is essentially no time decay, so you only gain or lose based on market movement, and not because of the mere passing of time. |
